July 6 (Bloomberg) -- Rio Tinto Group, the world’s third-largest mining company, expects more mergers and acquisitions in the Australian iron ore sector as China seeks to secure supplies of the steelmaking material.
Australian companies can’t finance all the iron ore projects by themselves and need external funds to develop, Sam Walsh, Rio’s iron ore chief executive officer, said at a briefing in Perth today.
The Australian government’s decision last week to cut a planned tax on mining profits may trigger more takeovers of resource companies. China, the world’s largest buyer of iron ore, posted economic growth of 11.9 percent in the first quarter, the fastest pace in almost three years.
“Merger and acquisition activity should now be more viable as this move by the government should alleviate some of the concerns about the longer term impact on investment by overseas interests,” Deloitte Touche Tohmatsu partner Gordon Thring said in an e-mailed statement today.
Rio shares fell 1.8 percent in Sydney trading to A$64.05 at 11:47 a.m. on the Australian stock exchange.
Yesterday, Thailand’s Banpu Pcl agreed to buy the rest of Centennial Coal Co. for A$2 billion ($1.7 billion), and Singapore-based Wilmar International Ltd. said it will buy CSR Ltd.’s sugar unit for A$1.75 billion.
Rio is studying expanding its iron ore production to 330 million metric tons a year, Walsh said. Demand is strong and will continue growing driven by emerging nations, he said.
The London-based company is awaiting for approvals from the European Union, China, Japan and Australia for its proposed plan to combine its iron ore assets with BHP Billiton Ltd. in Western Australia’s Pilbara region and is working through regulatory processes, Walsh said.
To contact the editor responsible for this story: Andrew Hobbs at email@example.com;